September 11, 2012 – SPAIN- Mariano Rajoy, the Spanish prime minister, has said he is more determined than ever to avoid having to ask for a bailout – despite the insistence last week by ECB president, Mario Draghi, that it would be a condition of the central bank helping to keep down a country’s borrowing costs. “If there is one overriding priority for creating employment it’s reducing the public deficit. That is far more important than what people like to call a bailout,” Rajoy said in a televised interview on Monday night. Draghi announced last week that the bank would buy unlimited quantities of sovereign debt to ensure eurozone governments retained access to funding, but he made it clear that there would be strings attached. However, Rajoy said he was not prepared to accept such conditions. “I couldn’t accept anyone else telling us what our policies should be or where we have to make cuts,” he said. How this apparent intransigence is received in Brussels and Berlin remains to be seen, but Rajoy received some support for his stance on Tuesday during a visit to Madrid by the Finnish prime minister, Jyrki Katainen, who said a bailout could be avoided as long as the measures taken in Madrid were seen as credible. Rajoy is at pains to show that he is in charge, that he is not the victim of circumstance and that he is making decisions of his own free will and not because they have been imposed on him. He appears to have decided that, if he has to make spending cuts and other unpopular decisions, then he will do it without ceding sovereignty the way the Greeks have been forced to do. His intransigence is perhaps more a manifestation of an old-fashioned, though admirable, sense of honour. During the interview he was candid enough to admit that he had gone back on election promises not to raise income tax and VAT, an admission few politicians are prepared to make. “The fact is no one told me the deficit was €90bn (£72bn) and not the €60bn I was led to expect. If I’d had that €30bn things would have been different.” Rajoy also reiterated that he would not adopt any measures that would harm pensioners, while dodging the question of whether he would reform the pension system itself. He insisted, as he has in the past, that no European leader has privately leaned on him to accept a bailout. Nor, he said, has he ever put pressure on the ECB to buy sovereign debt. Pressed on the issue, he said no decision had been taken, adding that he wanted to see what emerged from the next Council of Europe meeting on 18-19 October. This has been interpreted in Madrid to mean that no bailout will be announced before the regional elections, which are due on 21 October in his native Galicia and in the Basque Country. It appears unlikely Draghi was expecting to wait that long for a response. –Guardian

Eurozone breakup if reforms are not enacted: The euro zone could break up if people living in crisis-stricken southern European countries do not accept structural reforms in the coming years, the head of Germany’s BGA trade association said yesterday. Anton Boerner also dismissed concerns that Germany, Europe’s largest economy, could sink into recession in 2012 and said he expected German exports to increase both this year and next. “If people do not say yes (to structural reforms), then the euro will not be able to exist in its current form,” Boerner told Reuters in an interview. “If the southern European states say yes, we accept the challenges…then the euro will be stronger than ever before,” he added. Euro zone investor sentiment improved this month for the first time since March thanks to the European Central Bank’s plans to rescue the common currency by buying the bonds of vulnerable member states, Sentix research group said yesterday. Boerner said he did not expect Germany to sink into recession this year despite the Organization for Economic Cooperation and Development’s forecast last week that Germany would contract in the second half of this year. Economic growth slowed to 0.3 per cent in Germany in the second quarter and many economists predict a contraction for the third and possibly the fourth quarters. Boerner said he expected German exports to increase by “a good four per cent” this year. “Under no circumstances do I see them (exports) stagnating or falling,” he said, adding that whether or not exports grew more than this depended on the development of the euro zone crisis. Data published last week showed German exports and imports edged higher in July, highlighting the continued resilience of Germany, the euro zone’s growth locomotive, to the region’s debt crisis. –Guardian.co

Doubts loom on U.S. debt deal:To all who miss the highly volatile days of August 2011, when as a result of the congressional deadlock on the debt ceiling, and the S&P downgrade of the US, the DJIA swung by 400 points every day for 4 days in a row just to get Congress to come to the “compromise” exposed in painful detail by Bob Woodward a few days ago, fear not: they are coming back, and with a vengeance. Because while last year only the debt ceiling was under discussion, now we get the double whammy of the debt ceiling and the Fiscal cliff. And just so the suspense meter is pushed off the charts early, and the performance gets maximum billing for theatrics if not execution, House Speaker John Boehner has just said he’s not confident Congress can reach a budget deal and avoid a downgrading of the U.S. debt rating. Let us paraphrase: there will be no deal until the 11th hour, 59th minute, 59th second, and 999th millisecond, at which point the market will plunge and get Congress to do what it always does: Wall Street’s bidding, which now and always, is a smooth and seamless continuation of the status quo. –Zero Hedge

2 Responses to Eurozone crisis: Spain refuses bailout terms- the crisis you thought was over is about to get even nastier

Hi Alvin, followed your website for some time,first post. Thought I would let you all know here in Canada our government just expelled all Iranian diplomats and recalled our ambassador as well. Not really a big news story but Canada is usually given advance notice if America is about to do anything. Kind of a big red flag that most would miss.